Business & Finance Perspectives

Trade secrets are critical to competitiveness in every industry, and it is not just the obvious secrets like Coke’s formula or the air pressure of New England Patriot footballs. Many companies mistakenly focus their protection efforts only on key patents, proprietary processes, etc., and overlook other, less obvious factors that contribute to their competitive edge. These need to be identified and protected along with the highest profile secrets.
The Defend Trade Secrets Act (DTSA), passed by Congress in May 2016, is a new weapon for companies to fight trade secret loss. It is estimated that $300 billion of trade secrets are lost every year due to cyber attacks, criminal activity, and/or employee theft and negligence. The DTSA allows companies to pursue their legal cases in federal court. Previously, these laws were determined on a state-by-state basis, making prosecution complicated and difficult for victims of trade secret attacks. The DTSA also supports whistleblower activity, as it provides immunity for individuals or employees who confidentially report the trade secrets theft to an attorney or the government. Whistleblower protection is a key component of good governance practices and a quality ethics and compliance program.
On the downside, the DTSA is also more federal regulation. While it does impose new burdens on business (i.e. new reporting requirements, burden of proof that shows “reasonable measures” were taken to protect trade secrets), the benefits of the DTSA outweigh this drawback. The more tools U.S. companies have to protect their trade secrets, the more competitive we will be in the global economy.